What will separate the winners and losers as manufacturers embrace the shift from selling products to services?
The tools, skill requirements and business models of manufacturers are undergoing a transformation as businesses and consumers continue to shift away from products to services. While this shift is driven by convenience and predictability – it poses major challenges for manufacturing companies seeking to reimagine their product-market fit, and retool their sales and service operation, according to a new report, produced by The Manufacturer in association with Salesforce.
“Servitization is a journey, just like lean manufacturing,” says Tim Baines, professor of operations strategy, and director of the advanced services group at Aston University Business School, and a leading proponent of servitization. “It’s all about mitigating costs, risk, and disruption for customers through bolt-on services rather than products.”
Research firm, Gartner says that 89% of companies now compete on the quality of their service experience – underlining that the critical importance of getting the right balance between service levels and cost. With customers buying service availability rather than a product in a box, prolonged downtime presents the prospect of instant feedback on your service offering. Unless you can address these challenges, business reputation can collapse very quickly.
According to Daniel Kingham, remote services programme director with Swedish medical device manufacturer Elekta, the company is in the midst of a transformation program with a clear focus on areas with significant growth potential, such as service, software and image-guided radiation therapy.
“Basically, as we have grown as a company, we have moved from being a hardware sales company to a much more service-driven business,” Kingham explains. “Today, recurring revenue from software and service opportunities makes up a significant proportion of our overall business revenue, ensuring we provide an ecosystem of hardware, software and services, with the core equipment at its heart.”
The servitization report, available for free download here, features industry perspectives from:
- Koenig & Bauer
- MNB Precision
- Aston University
- Warwick University
- Cranfield University